Telecoms analyst/journalist, Richard Chirgwin, examines the cost of building the Coalition's FTTN (Fibre to the Node) NBN alternative network ($15bn) and models the cost of its subsequent upgrade to a Labor-like Fibre to the Premises ($21bn). The figures do not include the cost of Rural Australia's Satellite and Fixed Wireless networks ($3bn) or the cost of procuring Telstra's copper network (unknown). In the spirit of open journalism, if you have information which could be used to further-tweak the models, let us know.

I'm perfectly happy to accept Malcolm Turnbull's claims (for example, this statement, in this National Press Club speech from last year) that a FTTN network can be built faster and for around one-third the price of the NBN.

To ensure a like-for-like comparison, I'm going to run this calculation on the basis that ultimately, the FTTN network will have to reach 11 million premises (the NBN fibre is slated to pass at least that number by the end of the rollout).

Lets assume that a VDSL2 DSLAM port costs around $250, and use two figures from the Allen report - $130,000 per node site in fixed capex (actually putting the box in place and connecting it to electricity, plus fibre installation at the node).

I also have to work out how many nodes are required. Rather than run with the rough estimates in play at the moment, I have calculated how many nodes would replicate Telstra's current ADSL2+ exchange-level coverage (around 90 per cent of households - although most don't receive fast speeds). This is simple enough, since you can combine Telstra exchange locations and ABS maps to estimate who lives within different distances of the exchange.

Out of 11 million predicted households, 10 per cent won't receive the FTTN service, and of the 9.9 million that remain, 13 per cent won't need a node. This leaves us with 8.6 million households to be served by FTTN (as I said, to make the calculation a like-for-like comparison with the NBN). At 200 premises per node, that means the network will require 43,065 nodes.

I've also included an estimate of $100,000 for equipment that will need to be installed in the Telstra exchange to support the nodes, for the roughly 2,800 ADSL-enabled exchanges now in service.

We can now estimate costs for the proposed FTTN rollout:

If those costs are correct, we have a balance of around $8 billion for installing fibre from 43,000 nodes back to the exchanges. Is this cost realistic?

I need some kind of estimate of total fibre distance. The table below shows a current estimate of the geographic distribution of households from exchanges, and hence the number of nodes at each distance band.

With this estimate of around 60,000 fibre kilometres to connect the nodes, we can now tabulate the rollout for 8.6 million premises.

This leaves us $6 billion to install the fibre - and with only 60,000 KM to cover, that should be plenty. Considering that our network owner will be using existing ducts, and won't be renting the ducts from a third party, a national average of $100 per meter seems to leave room for all manner of disaster.

Is a $15 billion estimate for an FTTN rollout achievable? It appears the answer is "Yes."

The FTTN-to-FTTP upgrade

This is a much more vexed question. As I noted in another outlet, The Register, the BT Openreach installation fee of around 1000 UK Pounds to 1500 UK Pounds for a 500-meter fibre connection appears to be subsidised to some degree.

However: the proportion of households at various distances from exchanges also allows us to estimate the total node-to-premises distance for our 8.6 million premises. We only need to assume that in each distance band, premises are distributed evenly - that every home is on average 900 meters from a node (I suspect a 600 meter average node distance is too optimistic in Australia).

The total node-to-premises distance is in the order of 7 million kilometres. If we apply the BT price of 1000 UK Pounds per 500 meters, or 2000 UK Pounds per kilometre (around $3000), the national upgrade has a maximum price of over $21 billion.

If that were the end of the story, to get FTTN upgraded to FTTH would cost someone - end users, government or carriers - $21 billion in addition to the original $15 billion capex. Of course, a network owner would do their best (via efficient network design) to reduce this.

(Whether the upgrade costs $10 billion or $15 billion or $21 billion, please note: I have ignored all the other costs that are built into the NBN Co budget.)

It may be more economically efficient to do so as a private venture enterprise (depending on whether this is the best way to spend consumer or corporate capital).

However, it should not surprise anybody that my models here - for which I used no data whatever from the NBN - yield similar FTTH outcomes.

Whether you believe in a big-bang, forklift-upgrade fibre-to-the-home rollout or an incremental approach - for the fibre is to reach the premises - the most expensive part of the rollout will be the last. This holds true with or without having FTTN as an intermediate point; the difference is not the cost, it's the timing.

Note: I have left out considerations of the copper ownership in this analysis, because it would not represent capital expenditure in the rollout of FTTN. Instead, I assume that the copper will either be owned by the same body as rolls out the network, or alternatively, that it will be rented as "naked copper", as part of the network's operational expenditure.

Comments (79)

A Smith :

Abel Adamski :

01 Apr 2013 2:20:26am

Sorry Richard I believe your calculations are severely flawed.1) The FTTP component is only approx 12Bill2) Rental of pits ducts and conduits, much of which is requiring remediation + transfer of customers is $11Bill which is not negotiable3) there is the element of the cost of the POI's mandated by the ACCC and the associated backhaul and transits.4) Backhaul, transits for rural5) Wireless and satellite6) Operational, provisioning, fault and billing systems

My rough estimate is only a max savings of 3 or 4Bill (depending on state of copper which will have to be assessed before any real planning can occur for the change over)

So that $21Bill upgrade cost on top of a best case $4Bill savings leaves us $17Bill in the hole. Plus OPEX costs Plus less revenue due to lack of high value customers as average FTTN speed only 30-40 MB/Sec.

The only way to be cheaper is give it all to TELSTRA (who desperately need the Operational Systems) with maybe $15Bill of taxpayers money and just let them screw the nation over as usual (thats why we have to do the NBN )

Abel Adamski :

01 Apr 2013 2:34:40am

FredexGet real, all they ever had to do was maintain and uipgrade their network and use those costs to obtain higher mandated pricing.Higher wholesale prices would have just led to higher profits and share price, they are not a Public service, they are a listed company whose legal obligation is to their shareholders to maximise their share value and dividend

Abel Adamski :

Markie :

27 Mar 2013 7:51:37pm

"…21 billion dollars: The cost of upgrading the Coalition's NBN alternative to FTTP…"

Richard, you've summed up and exposed the problem with the Turnbull proposition right there in the headline. British Telecom went the FTTN route, much to Turnbull's cheers, and now find they have to do the FTTH fibre upgrade due to FTTN/copper shortcomings.

This project needs to be done once, done right and done fibre to the premise. It's already saving lives…

GrumpyOldMan :

27 Mar 2013 2:30:05pm

One of the most remarkable pieces of nonsense and blind stupidity that would be perpetuated with the Backwards Party's FTTN proposal is that Telstra's slowly decaying copper would remain the crucial part of the retail distribution network. So we would still remain the victims of Telstra's decaying copper, or victims of Telstra's unequal fight with other telecoms retail suppliers, or the short-term selfishness of Telstra shareholders, or the manic behaviour of future Telstra CEOs like Trujillo.

The masterstroke of the FTTP network is that it gets Telstra completely out of the network business and forces it to compete with Optus and others in the retail business. This was a piece of real genius by Conroy, and a decision that will form the basis of many management case studies for decades to come.

I just hope that NBN Co never actually gets sold off to the highest bidder because it will just repeat the disaster that followed the failure of the Howard government to enforce structural separation of Telstra.

Geoff Fellows :

Mark :

27 Mar 2013 12:36:15pm

I haven't read all the comments and just browsed the article so excuse me if I am being ignorant, but, Alan Kohler did an interview with the head of the NBN, on the ABC website somewhere, and he admits that the fttn is a lot cheaper to set up, but a big point to consider is the maintenance of the copper network versus the NBN fibre. Over time, and I am talking many years, the cost of maintaining the copper is far far more expensive. So in the decades to follow you would actually end up spending billions in maintenance that catches up to the cost of the NBN, for a far inferior product.

Mark :

27 Mar 2013 2:18:59pm

can i just add a very important point to consider is the fact that with the NBN you end up with the government and thus Australia owning a business worth tens of billions of dollars. The fttn by the coalition thus far is set to abandon the NBN and thus is just spending money to get other companies fast tracked in owning their own hardware. The structural seperation of Telstra is the most important aspect to come out of the NBN, the coalition will have to address that at a considerable monetary cost.

brutally handsome :

27 Mar 2013 6:27:18pm

I think Quigley forgot to mention that there is considerably less risk in FTTN due to it being a much more simple roll out. Being of greater risk, FTTP construction would incur cost blowouts and also delays. I'm not surprised by the consistent downgrades of targets, its expected, it will not change.

To show my unbiased analysis, I think NBN is a hoax, but what the Coalition is offering is pretty much the same thing.

Telstra is the ONLY entity that can build this network. But it is unlikely it would unless it is with some favorable terms from the ACCC. Any other method involves inefficient approaches and non ideal practices and messy legal & contractual interference.

In fact, Telstra estimated it would only cost them $4.7Bn to do it as an internal project - and I believe this figure.

The easiest and most likely outcome of all of this is that FTTN will get built ... but by Telstra, after terms are agreed to.

The reason is that ultimately it has no choice, it has to build it, so while everyone is distracted by NBNCo etc. the thing that matter is in the background.

Australia follows the British model, at some point FTTN would need to be built, within next 5 yrs , my guess.

GrumpyOldMan :

27 Mar 2013 9:22:06pm

"Telstra is the ONLY entity that can build this network."

But some idiots in a previous conservative government refused to enforce structural separation of Telstra into a government owned network operator and a privately owned retail operator. If they had had the brains to do that, then the network part of Telstra would have been ideally placed to build the FTTP network.

But since the morons in Howard's government allowed Telstra's retail tail to wag Telstra's network dog, that was never going to happen. Hence the Conway decision to set up NBN Co was a masterstroke for all Australians, not just for desperate Telstra shareholders.

And here we go again, ready to let the ideological morons in the Liberal Party wreck Australia's future by putting commercial self-interest and fear of debt ahead of common sense and the common good of all future Australians. How dumb can we be???

brutally handsome :

Bern :

28 Mar 2013 12:07:33am

If my memory serves me, that $4.7billion plan of Telstra's was for a mix of technologies, and basically involved them turning on already-installed ADSL2+ DSLAMs in many exchanges (that were, at that point, not active for political reasons).

The speeds they were offering, and the proportion of the population they promised to offer it to, basically meant they intended to market HFC, ADSL2+, ADSL, and 3G mobile (all of which they had already deployed), but they wanted nearly $5billion from the gov't to do it, along with permission to block competitors from entire exchange areas.

In other words, it was a scam. It's no wonder the gov't told Trujillo to go jump...

brutally handsome :

Loki :

06 May 2013 3:32:41pm

"I think Quigley forgot to mention that there is considerably less risk in FTTN due to it being a much more simple roll out."

Actually FTTN is a far more complex rollout, the FTTP network that is being built is actually far simpler from a technical standpoint as being as is is a passive network which require no provisioning of power except at the end points (and houses and exchanges already have power) and no disruption to the existing copper network.

FTTN not only requires the installation of 10's of thousands of nodes, they also need to be powered and the entire copper network rewired through them. The last bit will necessitate service disruptions while they cut and rewire the copper into the node of which they will also have to identify the active lines and where they go. None of which will be required for Labors FTTP solution.

RayS :

27 Mar 2013 12:31:34pm

Last month France committed to a FTTP network based on our NBN design. The initial deployment is budgetted at US$20 billion but will go higher. France depends on its people for its GDP, not digging huge holes, which we temporarily rely on.

A FTTN network would actually be more expensive than an all fibre FTTP rollout if the copper were replaced with new copper, because fibre is not as expensive now. Fibre also does not deteriorate with age and a passive design like the NBN is upgradeable to much higher speeds.

The FTTN costing is based on re-use of existing Telstra copper and replacing the passive connection Telstra pillar with an active node, powering the node which would be a large surface cabinet typically on the footpath and assuming there is no charge for the presence of the node on public property. The node cannot practically offer a wide range of services unlike passive fibre which theoretically only requires a different customer terminal to provide much higher speed and additional services.

The other factor in Turnbull's proposal must be that existing spare fibre and in particular aerial fibre strung on power poles is in the design rather than buried fibre. Nobody likes aerial cables because they are hideous, get damaged a lot and giver power companies an excuse not to remove the power poles.

Then the option of FTTP would exist but endusers would have to pay to have the civil engineering costs from the node to the premises. That is a much worse condition than even Telstra demanded since they factored construction cost into expected future revenue.

All in all, for these reasons and many others, Turnbull's proposed cheapskate solution stinks and will cost far more in the long run as well as being more difficult and expensive to manage. The numerous telephone exchanges would still be required if premises within a short distance of the exchange were served directly over short haul copper and the nodes would still demand a purchase and installation outlay though located in the exchange.

The NBN is not perfect, but it promises a much higher performance, clean, elegant and consistent solution that will last many decades. Turnbull's crap idea will be forever leaking financially and eventually, after other countries go FTTP we will have to do so anyway.

It's always better to do a proper job once. We have too many cheapskate systems already. It's about time we got something truly world's best.

As for the cost and debt, Australia's debt servicing cost is less than 1% of GDP per annum. How many householders can say their mortgage interest costs less than 1% of their income?? More like 20% to 50% is typical.

brutally handsome :

If you want to know how much FTTN would cost, its surprisingly easy...

You have Telstra's 2007 costing of its FTTN proposal it submitted to the ACCC, which estimated a city/metro ONLY build of $4-5Bn over 4 years.

or,

you can use the 2009 Kevin Rudd NBN FTTN + wireless which a consortium (non Telstra) put the figure to about $5Bn private + $5Bn gov't joint effort to provide essntially the footprint of todays NBN by NBNCo.

Remembering that this project proposal was the precursor to todays FTTP NBN, which shares most of the same metrics, but different technology.

So an estimate for FTTN would be about $10Bn. FTTP is more complex as we see by the delays already, it would probably be $60-$100Bn to finish.

nonny-moose :

28 Mar 2013 2:17:05pm

No.

you've left out cost to access copper. that 5bn+5bn is only the initial stake cost, and it was a rather loose approximation - Chirgwins 15bn is remarkably close to Citigroups 16.7 bn estimate, and again neither account for access to copper. so your 'costing' is significantly out.

The govt share of the NBN is 27odd billion of the whole 37.5bn investment. id like you to articulate how it can blow out by more than 2x (60bn) to nearly 4x the cost (100bn). that simply is not credible. stop listening to scarefactor artists - the cost does not have a 0% chance of blowing out.... but the chance of a blowout is a lot lower than people would have you believe. if there IS a blowout - and i still rate that only as an 'if' - my estimate is a 10-20% cost figure - 2.7 to 5.4bn for govt share and 3.75 to 7.5bn of total build cost.

there is no way the labour cost - something in the order of 12bn of the 37.5 - could dial up 4 or 5x, or the fibre cost - manufactured locally and a known cost subject to economy of scale i.e. you buy more and cost comes down - will come up to hit those purported blowout figures.

the 60 to 100 billion blowout cost has been bandied about by some folk with absolutely no qualification as to how they arrive at that figure. id love to hear it.

Harquebus :

27 Mar 2013 12:05:56pm

By allowing bridging equipment to connect to the NBN, more possibilities arise to share the cost.Emergency services and public transport could coordinate, radio communication blind spots could be eliminated, remote sensing and observation, ....

tomtoot :

27 Mar 2013 11:43:27am

I realise this topic was not done in great detail and perhaps a follow up could be done with actual costings of a NODEi.e give an example of a NODE and it's make up - will it have backup batteries and a UPS, if so then what sort of extraction unit will it have to clear the NODE of sulphuric acid fumes - how often will these batteries, fans and filters be maintained.?What are the noise levels of any extraction systems, what of the heat generated by devices used in converting from fibre to copper.?Will these NODES be flood proof (watertight)?

Using a NODE as I see it will prove very costly, inefficient and ultimately Australians will have an inferior infrastructure which will cost every Australian more expense to connect to the internet than we do in most cases at present.If FTTN is any example of LNP policy then what will they do with regard to education, health, etc., - I fear the worst......

BobB :

brutally handsome :

31 Mar 2013 8:25:15pm

I'm not sure if FTTP passes the grade for a delivery system when it comes to robustness.

The problem with FTTP is that it is a wavelength multiplexed system. The current equipment that is manufactured for FTTP uses a splitter system, such that each backbone fibre is split 16 or 32 way for that same number of end customers. So you can estimate how backbone fibres are required to serve 320 customers... 320/16 or 320/32 etc. This aspect of the technology will never change nor can it be upgraded. It is difficult to build redundancy for this type of passive technology and probably not achievable.

A FTTN system uses active nodes. That is, it has active electronics inside every node (roadside box), this equipment is typically a switch or router, which can be upgraded. And each node will only require 1 pair of exchange fibres. These two fibres can carry 10Gbps or greater, and serve the entire box/node, serving 600+ DSL customers.

The active FTTN system is more versatile and is more robust, in that each node can function independently as they are intelligent and self powered systems, whereas FTTP is essentially a passive architecture where communication is controlled at a large central source ie. telephone exchange. FTTP is essentially a single point of failure system, I have my doubts that this is acceptable for a nationwide technology, as the technology does not have ability to build fail safes in it.

Abel Adamski :

02 Apr 2013 7:14:24pm

So 600 customers off one node , 10G/600 = 16.6Mhz each.Plus being active the failure rate is temperature dependant, had some extended very hot weather and it seems to be a increasing pattern.I noted lots of traffic signal lights failed in that heat we just had.Just one node fail due to heat - 600 customers off the air. An extremely hot spell maybe 100 Nodes Aust wide crash - 60,000 customers off the air for how long ?

Magus :

27 Mar 2013 11:07:13am

Other variables:Council approval fees (both FTTN and FTTP. More so for FTTN as more local infrastructure)

% occupancy of nodes (node size is scalable in blocks at install only, and you will not have 100% occupancy) FTTN is installing at just over 50% to allow for failures/expansion. Less would be required for a FTTN netword as it can only be concidered an interum fix, but it would stll require some unassigned capacity at the port level.

FTTP areas - some areas will still require FTTP (there are estates with no copper or fibre, run on 3G)

Replacement fibre. (not all copper will be suitable. Fibre is now cheaper than copper.

dinos22 :

27 Mar 2013 10:07:45am

Why is ABC forcing Nick Ross to keep quiet about NBN? Anyone else seen from Nick since the last article? Looks to me like ABC management is under pressure from Coalition and by current polls a possible future government to abandon any criticism of coalition's disaster NBN ideas!!!!

ABC should be reporting news and articles how they really are. Look at the way this article is written. Not even the writer himself knows what in the hell he is trying to say because he is afraid of his own shadow to speak the truth and make conclusions based on costings which will clearly make Coalition look bad. This article reads like watered down dribble that no one will bother to understand.

GET NICK ROSS BACK AND GIVE HIM FREE REIGNS TO WRITE ABOUT NBN THE WAY IT REALLY IS ABC!!!!!!

tomtoot :

AJ :

27 Mar 2013 9:54:27am

I don't quite understand how you can justify leaving the estimated $17 billion dollar cost of the copper network out of the equation just mind boggling that you say that 2/3 of the cost of FttN is not relevant and then use these numbers without the copper costs to conclude that the price is similar to the NBN.

The second major problem is economic FttN is all well and good and cheaper but is cheaper for a reason. If I was Telstra I would take that $17 billion paid to me for the copper and overbuild profitable areas just after FttN is completed Decimating NBNCo and entrenching Telstra as the dominant monopoly once again.

In response NBNCo will have to increase prices to everyone (mainly regional areas) to make back the ~$25 billion investment made becuase they can't make back the money they have to sell the infrastructure Telstra buys it for a song and we are back to square one.

If you think this is unlikely just have a look at the history of the cable wars this is what Telstra did then so why won't they do it again?

Kevin :

27 Mar 2013 8:29:56am

This is so shoddily done as to add absolutely no value to the debate.Let's not mention the inconvenient fact that the coalitions broadband capabilities will be limited by the weakest link in the delivery chain (as is always the case). That is the existing copper to the house will determine to speed, reliability etc of our internet connection not to mention the fact that that copper is owned by a company, probably Telstra so choice will be severely restricted. Much of the copper cable is in poor repair but even if you have the newest and best copper phone line in the country, the broadband you receive will be obsolete because copper cable as a delivery method is obsolete.Yours and Turnbull's costs are very rubbery (independent experts costed Abbotts direct action plan at $30 billion per year, Turnbull said $18 billion, Abbott said $4 billion. Politics and not facts determine coalition costings) but surely everyone agrees that it is tens of billions of dollars and yet it doesn't provide even 1 house in the country with a state of the art, future proof broadband service. This is before the debate, action groups and petitions start for the removal of the 60000+ fridge size nodes (eye sores) polluting our streets. Nodes are not required for the government's NBN.Other industry experts have claimed the FTTN would cost the same as FTTH, so why should we believe your costings that are clearly far from comprehensive, carefully considered or complete?The upfront cost is not the only issue here. The NBN is $37.4 billion (reduced from $53 billion. Well done government) of off budget borrowings that we pay the lowest interest rates possible on because this government have achieved a AAA credit rating from all three major ratings agencies. Something never achieved by the coalition and reflective of how strong our economic fundamentals are now because of this government. The estimated return for Australia is 7%. The Labor governments NBN is effectively a positive geared investment which apart from being the only future proof option, will deliver Australia a substantial asset and a return of 7%- AAA credit rated interest of say 1%?Your article is effectively trying to assess the cost of making the coalitions half arsed policy equal to the government's NBN policy down the track. Ignoring your poor costings and the fact that this approach still leaves us with 60000+ fridge size nodes polluting our streets, this still does not take into consideration the absolute fact that the cost to fix the coalitions bodgie FTTN proposal, whatever that actually is, will increase over time because of that other inconvenient thing called inflation. Now is the time to do this and the only sensible approach is to do it right first time. The Labor governments NBN is the only sensible, future proof solution and it will deliver the nation a major asset and a future financial return. This is ignoring the real and immediate benefits to the delivery of health,

brutally handsome :

27 Mar 2013 8:22:09am

Can you explain why there are two costs here

1- Node2- Port

The Node includes the ports i would think, so why is there a separate capex for ports?

200 premises per node is also dubious. If the node is to replace a street cabinet, cabinets terminating say between 400-800 users, and a node with 600+ ports is installed, you may connect in excess of 800 users per node - 'conservatively' - so you've probably over estimated by 400%.

Your exchange equipment estimates are probably wrong too as the smaller exchanges will be bypassed.

$130,000 per node is also a bit steep. For metro areas in the cities, its probably going to be less than $100K, maybe much less if its done in bulk and good contracts can begotten. Maybe only $60-$80K ea.

Your fibre install budget is wrong...since it isnt FTTP, its actually quite small for FTTN.

Terry :

brutally handsome :

Well it says Per node fixed capex is $130,000 .. well how does one come to this conclusion?

I know cabinets can serve quite a large number of homes, 400-800 pairs/homes maybe, now I know the FTTN ISAM units can definitely support 600+ ports, so the cost may be much less.

There would also most likely be two typoes of nodes, a large one and a smaller version which would be cheaper for less dense areas.

what will probably be done is a lot of the smaller exchanges will be bypassed as the current footprint is designed for a copper network.

The fibre istallation budget is the biggest "?" of it all, at it accounts for $6.4Bn in this analysis. Well, I hope it is realised that if Telstra were to build it, this number would be very small, we are looking at only a few hundred million. I'm not sure how the $6.4 Bn figure came to be, but it must assume the cost to connect up the nodes is quite high, but it actually is very small. Even if it was done by NBNCo, no using Telstra ducts, it would not be that high, but would be a non-ideal approach, as it is inefficient duplication.

As for NTU, well how cheap are DSL modems? these come with bulk discounts and the ISP would probably pay for that, as a wholesale carrier, you'd want the ISP or retailer or user to pay for their own modem.

elementalest :

27 Mar 2013 3:17:36am

According to this article, the end product for Coalition costs ~$36b, while Labor costs $37b. Ignoring cost blowouts for both sides, it basically comes down to this:

Coalition offers us faster speeds than what we got now and supposedly much quicker. Is comparable to many other network infrastructure in the world. Does not fix the issues many people have with copper and could potentially worsen. Much of the copper network would need to be repaired or replaced. Has all sorts of issues with cabinets on streets, extra power usage and high maintenance costs. A best effort service. HFC area's will not be upgraded. Supposedly would be funded by gov subsidies (taxes) and industry investments. Has an eventual upgrade path to FTTP that require users to pay to upgrade. There is no time frame for an upgrade and would likely take far longer than Labors solution.

Although, assuming that NBN Co. is not dismantled and merged back into telstra if the Coalition get in and hey use the same kind of investment model the NBN use now. The cheaper FTTN version would presumably make a return on investment in a significantly shorter time span. Maybe even make a higher return on investment? Could the profit be used to fund the eventual transition to FTTP?

Labor offer significantly faster speeds, reliable and low maintenance network. Completely unified network and everyone gets the same service, not a best effort service. Will be state of the art with no other network like it in the world. Has a ROI of 7%, giving the gov a net profit. Is likely to be over 10 years before the project is complete.

For the same approx cost Labors solution offers significantly more value quicker, even if it goes over time by 1-2 years. IMO in every way Labors solution is better, they just need to manage it right.

Early Grayce :

27 Mar 2013 11:28:46am

I agree with most of what you say but we also have to add something.The estimate in this article totally ignores 10% of the people who will be serviced by FTTP entirely.All of the copper to houses needs to be replaced to near any estimated speeds of VDSL and after 100m the hardware is useless because speeds drop back to ADSL speeds which I am guessing is why the 10% is ignored.The copper replacement will need to be paid for by the govt/us and would most likely be done by Telstra in a subsidised model so that Telstra still owns what we have paid for and will charge on every bill accordingly.VDSL+ is experimental so we will be a guinnea pig for the company that builds the hardware in the nodes.

Unchained :

27 Mar 2013 2:49:34pm

Don't forget the FTTN cost/work that becomes useless after moving to a FTTP model longer term.. all that time and cost to set up those nodes goes down the toilet, wasted. Thousands of UPS's, wasted. You get the idea.

ru4real :

27 Mar 2013 1:35:36am

I'm a mathematician, but of an older generation, and not familiar with techno-talk. How can any politician explain this stuff to the electorate beats me! So when Turnbull says his option is cheaper, is it any better? If it's better AND cheaper, why didn't the government adopt it with Greens and Independents support?

AJT :

Hubert :

Paul Krueger :

27 Mar 2013 12:05:41am

1st Impressions were that this was unreasonable, but you seem to have done your guesses with a reasonable approach. It is reasonable to ignore the cost of the copper as capex, as the NBN is allowed to do the same.

It seems strange that FTTN + FTTH should equal the cost of FTTH alone though, does this seem reasonable?

As I see it, the big difference between the 21. Maintainance will be far far larger for FTTN2. Missed opportunity. We need faster then FTTN speeds right now for a significant proportion of connections.3. No ubiquity of connection4. Will it be cheaper to build FTTH in real terms in ~10-15 years?5 The liberal Party does not intent to use FTTN for 93% of the population. HFC areas ignored, and probably anywhere not "viable"

Bern :

28 Mar 2013 5:38:54pm

No, it's not reasonable to ignore the cost of copper as capex. FTTH doesn't "ignore" that cost, it doesn't incur it, because it doesn't use the copper. After the fibre is rolled out, and all customers transitioned over, Telstra (the copper owner) are free to pull it up and sell it for scrap (much of it is no good for anything else).

FTTN, on the other hand, *does* use that copper, and must pay for it. Nobody knows how much Telstra will charge for it, but if the LNP go into this with a pledge "written in blood" that it will roll out FTTN, you can expect Telstra to put a very high "political face-saving" premium on the price. No skin off the LNP's back, they're not actually paying for it out of their own pockets, but it'll probably result in the FTTN network capex getting close to or even exceeding that of the current NBNCo FTTH network.

Re the HFC areas being ignored - this is a very big mistake. I remember people talking about how congested HFC networks were in the US 20 years ago, when Telstra & Optus were just talking about starting to provision broadband on it. The effect was that, during off-peak hours, you had super-fast broadband (for the time, anyway). Right after school, the speed dropped down to dialup territory, and stayed that way for 4-6 hours every evening.

Even if they fix that congestion problem, you've still got the issue of upload speed. That's one of the key factors of FTTH that the alternatives being pushed by the LNP cannot match, under any circumstances. Ok if you support a few-to-many distribution model (i.e. big companies providing the content that the population consume), but with increasing use of cloud services, remote working, video calls, etc, this model fails, as uploads get closer to downloads for a typical user.

troy :

nonny-moose :

26 Mar 2013 9:11:53pm

"Note: I have left out considerations of the copper ownership in this analysis, because it would not represent capital expenditure in the rollout of FTTN. Instead, I assume that the copper will either be owned by the same body as rolls out the network, or alternatively, that it will be rented as "naked copper", as part of the network's operational expenditure."

and it is a shame you omitted that as it is generally agreed it is a not insignficant cost - back when Labor had a FTTN policy the figure for that access - which they would need, and Quigley points out does NOT come with the current Telstra contracts - could be up to 20bn. even assuming that figure is 50% out, thats still a 2/3 addition over the original "15 bn" estimate.

Opex is a more than passing consideration for any alternative network - BIS Schrapnel peg maintenance savings using fibre at 6-700 million/year. a FTTN rollout will be using smaller lengths of copper, admitted, but the exposure is still there. i think a pure focus on Capex is doing the discussion a disservice, and makes something appear much more palatable costswise, than it actually is.

that said an inclusion of eventual FTTN-H upgrade costs is welcome. even in ignoring opex it is still clear that 15bn + 21bn is not a significant saving over the cost of the NBN policy as it stands - and once you DO add in ongoing opex costs - ones not borne in the pure FTTH build - the saving looks even more dubious.

Early Grayce :

27 Mar 2013 7:55:02pm

I think you hit the nail on the head and it leaves only one real choice.Do we want to replace rotting copper with new copper, or do we want to replace it with Fibre.VDSL has a speed of around 100Mbps if your house has a cabinet in front of it to 30Mbps at 300M and less than ADSL2+ speeds from about 350m. This technology is stretching the coppers capacity to a point where the laws of physics must be changed dramatically before any noticeable advances are made.FTTP has a speed of around 1,000Mbps (as far as I know which should be thought of as a minimum) for the hardware that is currently being installed and fibres capacity has recently been pushed to around 4,000,000Mbps in a research setting so it will not be long before the option of speeding up the connection to well past a thousand times the current speed using the same fibre but changing the end termination hardware or a little under that with simple software updates.

Tallweirdo :

26 Mar 2013 8:10:01pm

As a possible improvement, your costing assumes that each of the 8.6M households served by FTTN would require a DSLAM port, this probably overstates the number of ports required as takeup will be less than 100%.

The NBN Corporate Plan forecasts 70% FTTH takeup by 2021 and presumably FTTN takeup would similarly be 70% or lower due to FTTN being less technically capable.

On this basis there should be some scope to align the number of DSLAM ports provided with the expected takeup resulting in a possible saving in the vicinity of $0.5B.

Larger savings could be achieved if the number of nodes could also be decreased but this would result in slower average end user speeds and greater chances of an oversubscribed node resulting in end users who are unable to get a service.

Goresh :

26 Mar 2013 6:43:05pm

"the BT Openreach installation fee of around 1000 UK Pounds to 1500 UK Pounds for a 500-meter fibre connection appears to be subsidised to some degree"

And ignores the fact that BT's network is FTTCurb rather than FTTNode meaning the amount of copper being replaced is much shorter than in the coalition plan. Subtracting the higher price from the lower gives us the cost per kilometer. "Average" cost to Australian FTTN customers to go FTTP would be about $3500 assuming similar levels of subsidy.

nonny-moose :

DarrenB :

26 Mar 2013 4:44:24pm

I suspect their is something badly wrong with your calculations.FTTN with all connections upgraded to FTTH in an on demand fashion and only $3B more total cost than running FTTH without the FTTN step?Lost are the volume of scale for the fibre rolled out to a street at a time.Money for the VDSL2 gone as it's not needed.Price for the copper network.No, There is something badly wrong with your costings.

Steve Mount :

It really matters little, now. With the oncoming demise of the Gillard Government, the NBN is doomed. Rudd conceived it, Gillard buried it. We will have to accept whatever the Coalition profers.

Perhaps they will trumpet an open, deregulated market, which fosters competition, and which, in turn, drives innovation, capital expenditure and delivers higher levels of service and lowers costs for the consumer.

Ummm, then again, perhaps not, they've already used that argument, for at least the last decade. The mantra of John Howard, I believe. Seems it didn't work.

Whether it's FTH, FTN, or dogs on the moon, Turnbull and the conservatives are now willing to spend PUBLIC MONIES, ie, TAXPAYER'S money on a PUBLIC comms network. Mercy, a socialist initiative from the Coalition, and that after they solf off Telstra in toto.

An admission of policy failure, fifteen years in the making and come home to roost.

Mr Turnbull, it semes, is unsure as to where he stands on this issue. One foot on the right of the fence, and one on the left...

Is it open, deregulated, free market competition, or public expenditure, Malcolm?

Early Grayce :

27 Mar 2013 11:48:27am

I am cautiously confident that Tony Abbott already has the speech stating that the forecasts for FTTN are now doomed as NBNco has put us in a hole by securing the ducts so they must go ahead with the FTTP model.T.A. will look like he was unwittingly deceived rather than doing the deceiving and Malcolm will be left swinging in the wind explaining the finer details unless the Liberal and National Party's decide to drop Tony Abbott as their combined leader in Favour of Malcolm Turnbull.

Tax U Bet :

ceedee :

26 Mar 2013 2:37:17pm

Your analysis omits cost for the maintenance of the copper network while still being used.Your analysis omits costs for node connection, a far more complex task than most appreciate to convert the digital optic signal to electric signal in the copper wire distribution line.Your analysis omits costs and payments to councils and state governments for the installation of the new nodes (roughly the size of a twin door refrigerator) every couple hundred metres down most street, let alone the environmental approvals that would need to be gained to instal them.Your analysis omits to mention that when the government went to tender on an FTTN plan that the main player Telstra did not submit a tender and that the tenders received were for inferior installations and represented costing greater than the government's NBN plan is extrapolated out to a complete roll out.And finally the plan you outline doesn't fulfill the fundamental objective of breaking the private monopoly in telecoms infrastructure.

Steve Mount :

27 Mar 2013 2:37:50pm

Yes, well, those ducts and copper were once public property, and owned by the public, for the benefit of the public.

But then they were sold off by Howard and Co., in toto. "There will be no seperation", need I remnind you. Now Telstra, legally, as a private, shareholder owned company, is quite entitled, and perhaps even obliged, to seek the best results for its shareholders.

Goresh :

26 Mar 2013 6:36:42pm

Also left out of the $15 billion figure is the cost of a DA for each node (lets ignore the delay for now)as power supply and storage will be required as well as the electronics making cabinets too big for "low impact" planning and electricity supply and consumption (we will also ignore the delay this will add).This will run to a few thousand per node.

Paul :

27 Mar 2013 10:57:50am

I think breaking the private monopoly is the most important part of an NBN. The Labour NBN will do this, allowing it to recoup its construction costs - essentially not costing the public anything. If the Coalition want to keep it all private, then the $15b construction cost is at the expense of the taxpayer. I'd rather see my monthly connection fee go to the government (no matter which party) than back into the pockets of Telstra.

hassa :

26 Mar 2013 4:57:12pm

Bilko,

You have to support the NBN ftth, otherwise it would be like the people who built the Sydney harbour bridge puting one lane ascoss the bridge,someone has to have some foresight ,unfortunately the LNP are very short on that ,they are all for shoddy quick fix objectives.

Id :

26 Mar 2013 4:30:10pm

For goodness sake.Why do we have to be continually forced to put up with typical Australian cultureless drivel such as"they don't even spell it correctly."After the American War of Independence, the Americans deliberately changed the spelling of hundreds of English words,but strangely,many of the French words used by the English such as "metre" were involved ( changed to "meter").Incidently I find it highly amusing to see golf course metreages printed as "meters"beside golf tees.Words such as "programme""defence,"offence" were deliberately altered to demonstrate a complete break with Britain.Websters Dictionary became the lexicon of choice,made up of all the "new"words.

Mr Creosote :

26 Mar 2013 1:08:00pm

I think the calculation for nodes should have been done with a minimum speed consideration. 12 mbps was Turnbulls original goal , as per his press club speech in August 2012. I think now though the minimum should be more like 25mbps, given the increase in fixed wireless/satellite basleines that have been announced. This basic speed requirement is an essential factor. I think it would increase the number of nodes required up into the range of 60-70,000

Richard :

26 Mar 2013 6:43:18pm

With vectoring I would think speeds would increase without the need to increase nodes. Besides, everyone on fibre would at a later stage be capable of 100Mb+. I don't see an immediate need (want is not a need)

AJT :

27 Mar 2013 5:00:12pm

You have to be 150M or less from the node to achieve these 100Mb speeds and the copper has to be pristine. Not to mentions that the up stream data is far less that what fibre is capable of. Also if there are premises 1-1.5m from the node vectoring will do nothing, and actually will be equivalent to ADSL2+ and degrades severely after that point. So for vectoring to work and provide 90-100Mb speeds all premises will have to be withing 100M of the node and the average suburban sprawl in Australia is quite extensive so best case scenario that will have only 200-300 premises per node.

Kevin :

Paul :

27 Mar 2013 9:39:36am

Well you can't guarantee a minimum speed of 25mbps with FTTN... You can't even guarantee a 12 mbps minimum. Use of a copper line means the connection you get is (as with an ADSL connection today) entirely dependent on the amount of line noise and length of the copper from the node).

While the maximum speed of FTTN is much higher than ADSL, a similar "drop-off" applies meaning that while people who currently get fast ADSL connections will get even faster connections, those who get slow ADSL connections could theoretically see no improvement at all. This is one of the key benefits of a FTTP model as there is little to no drop-off when you have a fibre connection all the way to the home (ie. a 100mbps connection will actually deliver nearly 100mbps).

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